Anthony Santomero, President of the Federal Reserve Bank of Philadelphia, spoke earlier today at the annual convention of the Pennsylvania Association of Community Bankers. His subject was the evolution of payments in the U.S.

Markets and consumers led us to a multiplicity of banks and a payments system that has been paper intensive. This is changing, as cards are replacing checks, and electronic clearing is truncating the maze of paper that fills our mailboxes. Our progress, while promising, occurs largely in fits and starts. We are a large nation with many providers, much complexity, and a philosophy of market-based solutions.

This has presented challenges for the Federal Reserve as a provider of financial services. It has necessitated restructurings, plant closings, and difficult decisions. Yet, we at the Federal Reserve are charged with the dual role of a regulator seeking to maintain the stability and efficiency of the payments system, even as we remain a provider of payment services. At times, these roles present different challenges. This is one of those times.

Nonetheless, as payments technology moves forward, our payments system will continue to change as evolutionary forces generate new innovations in payments and new ways to deliver them. This is why, in our own Reserve Bank , we have established a Payment Cards Center to add to our understanding of the use of electronic payment vehicles by consumers and their broader impact on the financial system.

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